It’s ironic to Chris Nordal that the Bank of Montreal announced quarterly profits of $1.1 billion Dec. 4.
The irony would be comical if the farmer from Arborg, Man., wasn’t out $62,800 at the same time that BMO increased its quarterly net income 41 percent.
In September, Nordal delivered $62,800 worth of winter wheat to Puratone, just before the Manitoba hog production company entered creditor protection.
In November, Maple Leaf Foods bought Puratone for $42 million, but the hog company owes $86 million to secured creditors, including BMO and Farm Credit Canada.
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On Dec. 3, Nordal learned at a Keystone Agricultural Producers meeting in Arborg that neither Puratone nor Maple Leaf will compensate farmers who delivered grain to Puratone but never received payment. Meanwhile, BMO announced Dec. 4 that its fourth quarter net income increased 41 percent, relative to 2011.
“BMO reported $1.1 billion (profits) in the last quarter,” Nordal said.
“I don’t know, they’re the secured creditors and we’re unsecured…. On our farm, this (loss of $62,800) represents 20 percent of the gross farm income.”
It’s unlikely he’ll ever recoup his losses, but Nordal has joined 20 other Manitoba farmers who delivered grain to Puratone but haven’t received payment.
The group, known as Disgruntled Farmers Seek Justice, has hired a lawyer with Tapper Cuddy in Winnipeg. They intend to file a lawsuit to recover cumulative losses of $1 million.
While the group has retained counsel, no court action had been started at press time and the allegations are unproven.
“Do I expect payment? No I don’t. But it’s a matter of principle and I don’t want to give up,” Nordal said.
Like many producers in the group, Nordal alleges that Puratone, BMO and Farm Credit Canada discussed creditor protection well before the company officially applied for protection in September.
“This ship didn’t sink overnight,” he claimed. “Puratone may have filed for creditor protection Sept. 12 but this required months of planning.”
Deloitte and Touche is acting as the court appointed monitor, overseeing the creditor protection process. In its third report in this role, Deloitte noted that Puratone initiated a Sale and Investor Solicitation Process (SISP) last spring to find buyers for the company.
“Prior to the CCAA (creditor protection) proceedings, the applicants (Puratone) had engaged EYI (financial advisers) to facilitate the SISP, which commenced in May 2012,” Deloitte wrote, adding BMO and FCC were part of the process to find a buyer.
“The monitor also understands that the SISP was carried out in consultation with the applicant’s (Puratone) senior secured lenders, BMO and FCC.”
Vic Kroeger, director of corporate recovery, Western Canada, for Meyers Norris Penny, said it’s normal for major secured creditors to play a role in how a debtor company enters creditor protection.
“And well they should,” he said. “They’re owed the most money.”
John Sigurdson, a producer from Riverton, Man., who is leading Disgruntled Farmers Seek Justice, said Puratone could have filed for creditor protection in August. Instead, he alleged, the company chose a more opportune time.
“Puratone and their bank creditors could have chosen to go under CCAA (Companies’ Creditors Arrangement Act) one month earlier,” said Sigurdson, who delivered $60,000 worth of winter wheat to Puratone.
“But if they had chosen that time period, they couldn’t have filled their (grain) bins beforehand because there was no grain on the farms.”
Sigurdson said Puratone repeatedly called a number of farmers within the group, asking them to deliver grain. As well, in some cases, Puratone offered producers a premium over market prices for their feed grain, he added.
Sigurdson said the cost of pursuing legal action is well worth the additional expense.
“Even though we end up losing in the end, we have to make the point that big companies can’t just run roughshod over farmers.”
If there are other Manitoba farmers who delivered grain to Puratone and never received payment, Sigurdson said they can join Disgruntled Farmers Seek Justice up to Dec. 21.
Puratone could not be reached for comment Dec. 10.
